The Tricky Balance Between EV Range and Cost Continues in 2018

CNN last week declared that 2018 will be “the year of the electric car.” This proclamation happens nearly every year—despite the fact that electric cars remain about 1 percent of the new-car market. CNN rightly states, “Americans (in 2018) will finally be able to buy reasonably affordable and widely available electric cars that can hold enough power to breeze through their daily routines with no worries.”

Perhaps the news organization is pointing to the new breed of longer-range EVs. As the U.S. Department of Energy indicated in December, the median EV range increased from 73 miles to 114 miles from 2011 to 2017. In fact, the top-selling Tesla Model S, Chevrolet Bolt, Tesla Model X, and Nissan LEAF have respective ranges of 315, 238, 289, and 150 miles. (Plug-in hybrids have similarly increased in all-electric range, led by the 53-mile Chevrolet Volt.) That’s a remarkable jump in a short time.

As EV advocates have long argued, the average U.S. commuter drives only about 40 miles per day. So then, what’s the magic number for the amount of range needed to satisfy the desires, if not the actual needs, of American car buyers—at least enough to turn them into EV drivers?

That will be a key question for the Ford Motor Co. Its chairman Bill Ford, speaking at this week’s annual auto show in Detroit, said the company would offer 16 fully electric vehicles and 24 plug-in hybrids by 2022. “We're taking our mainstream vehicles, our most iconic vehicles, and we're electrifying them,” said Ford. “If we want to be successful with electrification, we have to do it with vehicles that are already popular.”

Pushing More EV Models or Longer EV Range?

Ford is only the most recent automaker to announce plans to electrify its entire fleet—following similar previous announcements by General Motors, Toyota, and Volkswagen. So far, Ford’s only pure electric car is the Focus Electric, which is far from mainstream. With its current driving range of 115 miles, the Focus Electric only adds about 150 new customers per month.

It will be fascinating to see how Ford spends its promised $11 billion EV investment—whether to increase the number of available EV models or to dramatically bump up the range of those vehicles as well.

Of course, splashy announcements at major auto shows will be put in check by auto-industry bean counters evaluating the cost of added EV range. General Motors and other automaker believe that long-range EVs will be profitable as soon as 2021—when the cost of batteries reaches an acceptable level—but there is little consensus on that topic.

Sergio Marchionne, the chief executive of Fiat-Chrysler Automobiles, continues to assert—as he has for several years—that electric cars are money-losers, and that nobody knows when they will become profitable.

“I don’t know of a (business) that is making money selling electric vehicles unless you are selling them at the very, very high end of the spectrum,” Marchionne said at the Detroit Auto Show on Monday. “Whenever we end up going to auto shows, the intensity with which we make these proclamations goes up exponentially. So making an announcement at the Detroit auto show that we’re going to have X-number of vehicles that are electrified in the future, is that a wise economic thing to say? The answer is probably no.”

While adoption of electric cars has slowly increased in recent years—and will likely continue in this fashion—any so-called tipping point is hard to predict. “It's not going to be a straight shot to that point,” wrote Matthew DeBord last week in Business Insider. “EV market penetration is now pretty weak, much weaker than predicted 10 years ago.” He argues that profitability is challenging because the scale of production remains small. Meanwhile, car companies continue to produce electric cars to meet fuel-economy and emissions laws—and unfortunately, annual EV sales grow incrementally rather than having a breakthrough year.

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